Leifheit Aktiengesellschaft (LEI) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you very much for joining us for Leifheit's conference call on the business performance in the first half of 2026. First, the management team will present you financial figures and important strategic initiatives. Afterwards, you will have the opportunity to ask questions directly. Please note that this conference call will be recorded. I will now hand over to CEO, Alex Reindler; and CFO, Marco Keul, for the presentation. Mr. Reindler, please go ahead.

Yes. Thank you very much, Mr. Boas. Dear ladies and gentlemen, a big welcome to our investor call for the half year results 2026. Welcome, and thank you very much for joining the session. As usual, we will go through an update on the key numbers on the financials. Marco Keul will take over. And at the end, we will close, as usual, with an update on the strategy and on the strategic initiatives. So let me start with the summary. Here, you see first 6 months developments and main initiatives. First of all, I mean, obviously, a very challenging market environment. On the other hand, we have been investing into the brand in the first half of the year as part of the start of the brand relaunch. You see turnover minus 5.8%, obviously, not in line with our initial expectations, reflecting the challenging market environment. On the market data, on the market share, we have been receiving actually just yesterday, we see that reflected in the market in terms of market decrease. On the other hand, we have been gaining market share in the first half in our key category. On gross margin, you see, I think, another great improvement on gross margin. We have been talking about this throughout the last 3 years, I think, continuous advancements and improvements. On the other hand, in terms of efficiency, we have now been communicating and launching our FOCUS program to really transform Leifheit into a simpler, faster, more customer-centric organization and therefore, strengthening our competitiveness and profitable growth. As a result of the -- mainly of the marketing investment, you see an EBIT of minus EUR 2.7 million for the first half. And with the adjustments or with the investments of the restructuring program and the net sales development, we have been adjusting our forecast for 2026. So there, we are now stating that turnover will be slightly below previous year and EBIT will be stable as free cash flow on 0, due to the adjustments on the restructuring program, on the FOCUS program. So if we start with the consumer, as usual, we see that consumer sentiment continues to be weak, no big improvements here, different by markets. In some markets, we also sense the decline in the customer or shopper traffic. And as I said, we see the market or this consumer sentiment within the market decline. We measure 2 markets now; manual cleaning and also drying, our 2 categories. The drying actually in Germany only for the first time. These markets are reduced by 5% to 6%. In fact, we see even a market decline in quarter 2 by 8%. So, all the negative impact on the Middle East escalation and on the higher fuel prices, we see reflected in the market. This is the consumer sentiment. If we now have a look at the turnover development, you see that, obviously, the weak market conditions are reflected, although -- and they are outweighing the targeted marketing initiatives, which we had in the first 4 to 5 months of the year. You see the group negative by minus 5.8%, which you have seen before. Household is slightly more negative. Main impacts are here -- I mean, also overall, the discounter channel, so specifically Lidl and Aldi and the hypermarket, Kaufland. These are the 3 most challenging customers -- discounters partly because they go on the private label strategy given the environment, specifically, Aldi. Kaufland more because overall, not only Leifheit, but overall, they have been coming into the year with higher stock level than usual. So, they were reducing promotions and pushing these higher stocks to their promotional aisles, also the standard shelf. So, these are the 3 main impacts overall, but specifically here on the household. On Wellbeing, you see that our Soehnle brand, as you know, we have similar impacts here. They weigh a bit stronger, especially on one of the discounters. But there in the outlook, we are a bit more positive because we have been recovering some of the promotions. So therefore, we expect this in the second half to be better. On Private Label, you see a very good development, 6%, which primarily comes from our -- we have 2 French subsidiaries here, Birambeau and Herby. The very positive development comes especially by Herby due to stronger promotions and also better promotions, working better in terms of sellout. So overall, a very good development. Birambeau is also on last year's level. So, you see there that the Private Label segment is performing stronger than the branded segment in the environment we are in. We see that also in the Leifheit market data reflected. If we now have a look at the different regions, you see also here the impact of the customer I was mentioning, especially on Germany because these customers are very strong in Germany. So, these are the discounters and Kaufland. You see, therefore, minus 9.2% in the German business. The other regions performing slightly better than average. As a result, Central Europe with minus 3.7%. Actually, some of the markets develop on last year level or slightly growing with Belgium, Austria, Switzerland, Netherlands, so all where we have a stronger brand equity that helps in the environment we are in. On the other hand, slightly below that number is Spain and Denmark, where we have a slight higher decrease. But the pattern is more in markets with better brand value with stronger brand awareness. And you know we have a couple of these strong markets where the development is much more resilient. On Eastern Europe, therefore, a similar picture. But here, we are very happy with the development in Poland. One of our definitely growth markets, develops in the mid-single-digit positive. On the other hand, Czech as last year, still a very challenging market in terms of consumer sentiment to a certain extent, but also in terms of promotional pressure. So, Czech below that number. And then -- okay, you have the small part of rest of the world, outside Europe, where we have a mixed bag. It's slightly positive, but the number overall is obviously small, driven a bit by the U.S. where we have a small business. So, you see the different quarters developing. After quarter 1, where we had a minus 4% in net sales. We unfortunately saw a stronger decrease, also on a stronger decrease in 2025. So therefore, definitely below our expectations very clearly. We see that same development in the market development. So the market developed in quarter 2, around minus 8%. So, even stronger negative than for the first half, as I mentioned, and therefore, reflected, obviously. I think one part is, for sure, petrol pricing and therefore, more hesitant consumers when it comes to purchases. So overall between core and non-core, we have a very reliable core business with a CAGR over the last 10 years, 3x the company growth, 4% CAGR. This year, you see here core and non-core relatively similar. It's, of course, a picture we don't necessarily like. But on the other hand, we also now reduced some of the non-core businesses last year. And on the other hand, we also see that the market in our core categories, as I said, are impacted. On the other hand, we also have some of the discounter activities, which we have not had in the first half. We are slightly more positive on that for the second half. Therefore, also, we are more positive, especially on that channel to achieve our outlook when it comes to a better performance. So, we expect year-to-go performance on last year level. And one of the drivers is also a discounter where we have gained some activities versus 2025, which makes us confident. So if we have a look at the distribution channels, I think we see a very interesting picture, which shows a different development by channel. So, you see here especially growth -- strong growth in the DIY channel 7.5% growth. We are very happy with that. We have been developing that channel very actively. As you know, I mean, you see that this is one of our 3 top channels. It is also the natural channel of Leifheit as a higher quality brand. And we make good progress in France, in Spain, also in Germany, especially OBI, for instance, is one customer where we had a very good customer engagement, which led to the 7.5% growth in DIY. B2C, we will -- we are talking about B2C, of course, a lot when it comes to e-commerce. We have very good capabilities, and we see a very strong growth there, 33%. So, you will ask how come? The main part of that growth is really that we are taking over more products from the B2B vendor relationship with Amazon. This has simply the background that Amazon is driving a lot of stability. So, they are not pushing all our products. And in that case, we are flexible with our seller accounts, take these products on and that reflects a very strong growth. But also other marketplaces are developing very positively. So on B2C, we are very happy with the development, and we expect that also to be continued in the second half. And again, it was always a strategic driver for us. So, very good to see that we move strongly there. Hypermarket is more or less in line with the average. And then discounters, I've been talking about discounters already 3, 4 times, I think, in the last 10 minutes, but it is definitely a channel which is challenging for the category overall, so also for our competitors, but remains obviously an important channel for us as well to reach consumers and to reach interesting price points as well. And as I said, we are quite positive for the year to go with some agreed promotions already. So, this is from my side so far. I'm back in a moment, and now I hand over for the financials to Marco.

All right. Thanks, Alex. Let me briefly guide you through our financials for the first quarter because after that, we will get to our strategy update, outlook for the rest of the year and our Q&A session. Looking at our P&L, it's worth mentioning that despite our decline in turnover, we were able to improve our gross margin in the first half of the year, but in Q2 as well compared to our gross margin before special items from last year, meaning our strategic optimization project in production, we are up by nearly 1 percentage point and we achieved that despite the fact that we had already a negative impact because of price increase of raw materials and energy. Unfortunately, we expect that situation to become worse in the second half of the year, which made it necessary to negotiate sales price increases in Q2 that will become effective mostly during Q3. We will look at the development since 2022 on the next slide. Unfortunately, our margin improvement and our cost savings were not able to fully cover the negative effects in other areas. The increase was primarily driven by additional marketing activities, increase in costs by additional marketing activities, with investments exceeding the previous year's level by a mid-single-digit million euro amount, increased freight out because of the D2C growth and the high fuel prices and additional costs for strategic projects such as the FOCUS projects, we will come to later. On top of that, we had EUR 1 million other operating income in 2025 because of a patent infringement, which is clearly a one-off. And all combined, our EBIT in the first half of 2026 is minus EUR 2.7 million, meaning that we are breakeven in the second quarter. Our strong margin improvement still goes on in the first half of the year, but also in the second quarter. In the second half of the year, it will get even harder to maintain our constant improvement. Our expectation behind our guidance is still that we have to prepare for negative effects due to the war in Middle East until December 2026. Our countermeasures such as the previous mentioned sales price increase are already in place, so we have a good chance to make that happen. Needless to say that our strategy to strengthen our production capabilities and capacities in the previous years to become more resilient against those macroeconomic crisis is still is a clear advantage today like that. Regarding free cash flow, we are at minus EUR 7.3 million after 6 months, which is EUR 3.5 million less than previous year. On this chart, here, you can see the different drivers of that development. The net result for the period is obviously negative. This depreciation is around EUR 0.5 million higher than in previous years because of our investments in production and logistics. The trade receivables are up by EUR 3.3 million because of the dynamic of revenue during the second quarter, meaning that, like, in the first quarter, we had a higher sales volume towards the end of the second quarter. Our investments are temporarily up by inventories -- I'm sorry, inventories, are up temporarily by 4.3% and that also has to do with the seasonality of our business and with safety stock of raw materials because of our expectations for the second half of the year, which I mentioned earlier. And both trade receivables and inventories will eventually come down in the upcoming months. So, our goal is still to decrease our working capital until the end of the year. Our investments of EUR 2.3 million, EUR 1.5 million below previous year. And due to the current business development, everything that we planned will, of course, be carefully checked now, if we have to cut or shift investments towards next year in the middle of that process. It is worth mentioning that within the second quarter, our free cash flow is EUR 4 million positive. And with the one-off effect of our FOCUS program, we expect our free cash flow to be breakeven at the end of 2026. Yes, we are fully aware that the months ahead will remain challenging. But nevertheless, our commitment to creating sustainable shareholder value remains unchanged. We have no plans to alter our dividend policy and continue to believe that shareholders should benefit from the company's strong liquidity position. At the beginning of June, our shareholders at the Annual General Meeting approved our proposal to distribute a dividend of EUR 1.2 or EUR 1.20 per share and to implement the proposed capital measure. And this provides us with additional flexibility -- financial flexibility to support future activities. Yes. And with that, thanks for your attention. I give the word back to Alex.

Yes. Thank you very much, Marco. So, let's come to the strategy update. So the strategy, you know by now, while the market conditions remain challenging, our strategy remains the same. Question obviously is what is the next phase? And here, I would like to give you an overview first and then more details. So, these are the 3 elements which are now very important for us in this phase of the strategy deployment. First of all, our Leifheit brand relaunch. We were talking about this in the previous calls. It's about sharper positioning. It's about making sure we address the right consumer needs with the right product innovations, and we have targeted marketing activities, especially at the point of sale. This is now coming to life at the point of sale while we speak. We have a phase-in, which will start now as of July, August and go until end of the year because it's a phase-in. We have then the FOCUS performance program, I was speaking about briefly at the beginning already. And I will give you more details. It is about making Leifheit more competitive and future-proof as an organization. And then we have regarding FOCUS company news. I think most of you will be aware that we always have said we want to review our non-core non-FOCUS subsidiaries and businesses. And we are now in -- we are now engaged in M&A adviser where we have a process of a potential divestment. This obviously -- the outcome of that obviously remains open, but we wanted to communicate this as an important element. So, that is FOCUS company. So overall, these 3 elements are the phase of what we are dealing now with, how do we want to deploy the strategy and how do we build and strengthen efficiency and resilience and obviously, future growth of the company. Let me start with the FOCUS performance program. And it's important to say that -- and we have seen the efficiencies as one example in the gross margin, but it is important that this is not the first time we look into how do we make the organization more efficient. But now really specifically, it's a very important program to focus on the organization, on the structure, on how do we make the structure more efficient, more customer focused and therefore, also more focused on profitable growth. To give you more details here, the goal is really as part of our overall strategy to increase customer focus and agility to be faster as a company, leaner and more fast in terms of response to new customer needs. And we want obviously to really create a better platform for profitable growth in the future. What is happening in the program? We have a new operating model, a new governance, which has orientated itself along the key processes of the company, especially lead to order, order to cash, so really process organization and therefore, really helps us to not only simplify these processes, but also digitalize these much better. And you remember, we launched last year brownfield S/4, which is now a great platform to work on that. Overall, of course, with the savings comes also leaner structures and therefore, faster decisions, flatter hierarchy and more ownership of the teams. Obviously, up to 70 positions and FTEs we have to reduce. We want to do this, of course, in a socially responsible manner. And we have been doing so also last year with the production shift from Germany to Czech. So, we want to do that in a similar manner, obviously. with our workforce also in this project. Financial impact, as of 2028, we will have the full impact, which is a recurring annual savings of EUR 7.5 million. First benefits are expected, of course, in 2027. And the overall implementation cost is EUR 9.6 million, which has an EBIT impact in this year and therefore, the adjustment of the outlook for the year. Total impact is around about EUR 5.4 million. This is to the FOCUS project. I mean, in terms of headcount reduction, we have been, of course, working on that also beforehand already, but now the project comes and will bring the additional efficiencies. But overall, you see that also, especially in our production area, we have been reducing already positions versus last year. So now brand relaunch. I think something very exciting, which now comes to market really to drive stronger sell-out at point of sale. You have here some examples. We started actually beginning of the year with a new packaging and also better products in the ironing area. Overall, what we try to do is stronger benefits, what makes us superior to private label potentially, but also to competitors. We want to have a more impactful brand presentation at point of sale. You see this. Maybe it's at the beginning on that picture in the middle. And therefore, also create, of course, stronger point-of-sale presence where usually we as a brand in a lot of markets are very strong in terms of space. We want to leverage that better, highlight that better, make it more obvious and also with a clear call to action for shoppers. So it's the visual impact at the same time, really the -- what is the product benefit, what is the point of sales. So this, as I said, will now start. Next to that, we have innovations, and we continue to drive our innovation. SUPERDUSTER, yes, we spoke about that a lot. I think it's, first of all, a very important category for us. We have not been present or nearly not present. We have now started that last year. You see the growth rate. Of course, that is still on a relatively low level. But overall, it is the biggest category we are in. It is bigger than floor cleaning. So a very big category, and we have a very strong point of difference. It's washable. It's reusable. It is sustainable and much better than the leader in the market, Swiffer. And we have been pushing that a lot. We continue to do that. As one highlight, we now got distribution expansion in Kaufland. We were speaking about Kaufland before. We are now in Germany in 800 stores because performance of the product was good, and we continue to develop that. It is not the sprint. It is definitely the Marathon, I think. This is also part of that, but we have a great product and are very convinced that we will develop that continuously very positively. Same breadth, the BLACK DIAMOND line. We have been launching that, I think, 3.5 years ago. And since then continuously develop the line. It's now around about EUR 12 million and growing. You see MAT 19%. We want to keep that momentum. We want to continue that momentum into the future. And therefore, we now come -- we came with new products already beginning of the year, but now we come with important cleaning. [ Coffee ], Clean Twist in black. So, we believe because this is a very big segment as well for us. This brings really new use to the category and it's also attractive for retailers because we get additional space, additional promotions. We will come actually with an additional variant of that beginning of next year. So, you see that the pipeline is continuously coming and continuously expanding and more important is also to continue to develop these innovations like SUPERDUSTER, not to do it 1 year, but really continuously to develop that. Then very important, and I think we are internally very proud of that. We come with Pegasus Rock Solid. I think the name is the benefit in the program. I think it's the best standing dryer we have ever done as a company. It's really reflecting our brand as quality leader and really giving here maximum stability mark-free, so you don't have the marks on shirts because they have the thicker version, a 10 years quality speaks also for itself. So it comes in 2 variations, and it will be dedicated especially to DIY and to our seller e-commerce D2C business. So also in terms of channel differentiation, we play this out in a very, very good way. So, that's from the brand relaunch, from the innovations and prior to that, FOCUS program. This is what we drive in terms of strategy. As an overall summary, as an outlook, of course, I think we remain in a very extremely challenging environment, I would say. But we continue to deploy our strategy and develop our strategic initiatives. I think that's the important aspect. I think I don't have to speak more about the economic environment. We saw that also in our markets, but we want to really actively drive growth continuously and to be growing in these segments, obviously, as I showed you. So, we will further develop our innovation pipeline. We have a long-term innovation pipeline where more and more innovations are going to come. Now the new brand identity being more specific why we are better, why we are the best in the categories we are focusing on gives us also a lot of reassurance. And then on the other hand, we also work on efficiency and resilience and therefore, very important. The FOCUS program, of course, with the savings, it will deliver, but even more important, I think, setting the company up in a better quality, being faster, leaner and more customer focused swill also develop future profitable growth. This brings us to the outlook next. You know the outlook. You have seen it before. Of course, you could challenge, well, that looks challenging. We still believe that we can deliver that. We are -- of course, now the focus for this year, I spoke about that already. We think mid-term potential is still to make this a growing company on the one hand through the initiatives. On the other hand, obviously, a bit of an -- in an environment, which helps us, is obviously also welcome. But then we think growth between 3% and 6% is feasible. If you have seen, we moved that out by 1 year. So it's 2028 because, obviously, we see that we first have to do the further implementation of the strategy to deliver that. And also on EBIT margin, we believe that we can deliver 7% to 10% in the mid and then even in the longer term. This brings us to the outlook. Here in the detail for the group turnover, slight decrease of turnover, which makes for the year to go on previous year level. This, you see in the household same way. Wellbeing will improve in the year to go. And therefore, we expect mid-single-digit decrease. Private Label, especially where we will continue with a very good performance and therefore, high single-digit growth. And in terms of EBIT and cash flow, we expect breakeven. So, we expect to be at 0 for both KPIs. Yes, as a summary, why we believe Leifheit is a good investment. We have a strong brand in attractive core categories, and we want to become leaders in more markets in more of these 2 categories. We believe we have the potential to expand based on our growth drivers. I have been highlighting today, especially innovation and e-commerce. And at the same time, we want to be more efficient as an organization, but of course, also here in production and logistics. And overall, Marco spoke about capital allocation, which we remain very focused on and very committed to. So, that's the presentation for today. Thank you very much for your attention, and we come to the Q&A now. Thank you very much.

Thank you, gentlemen, for guiding us through the slides. So let's jump now into the Q&A session. [Operator Instructions] So, we start with Mr. Breitenbach.

It's Klaus Breitenbach. Can you hear me? I have a couple of questions. The first one is on your gross margin, which increased to 46.2% despite declining revenues. How sustainable is this improvement?

I certainly understand that it's not easy to do that, what we achieved because when you think about utilization of the production and so on. So, we have various negative effects within the gross margin, but there are no one-offs or something like that. So therefore, it's sustainable. It will be impacted by higher raw material costs and container costs we expect in the second half, but we will work against that with the price increase. So therefore, it's a sustainable development.

Okay. The next question is, which demand trends did you see in July and early August?

Sorry? What was it?

Demand trends. Demand trends, did you see in August -- in July and the early August for your products?

Yes. Which demand coming from consumers from the -- so I mean, August is very early day. I think August overall looks good. I think July was on the development we have been seeing before. So very -- yes, kind of in line with that. But we are quite positive now with August, but still early beginning. But again, overall, I think on the year-to-go development, okay, we are cautious. I think we have been kind of, obviously, ourselves disappointed by the top line development that I think must be clear. But we are more positive now for the second half. We are running against a weaker 2025. And on the key customers, which have the key impacts, we see a much better negotiation on activation. So, this may be generally. But to your question, July more in line with year-to-date and August positive, but still early.

So, Mr. Kaiser, you were raising your hand?

A couple of questions from my side. I start with the first one. You already mentioned it during your presentation, the external M&A adviser and the M&A process you are currently in. Could you shed a bit more light on that, maybe assumed time line or anything else?

Alex, do you want to take that?